Inheritance Tax on German Property for Non-Resident Heirs (2026)

The rule that catches expat owners, the allowance cut that catches their children, and the five things an owner can do about it while alive.

Quick answer

The heirs do, to Germany. German real estate is always German-taxable. If neither the deceased nor the heir lived in Germany, only German assets are taxed, but the personal allowance is cut pro rata and foreign inheritance tax is not credited.

Germany taxes the property, not the person

Most countries tax an inheritance because the deceased or the heir lived there. Germany does that too, but it adds a second hook that expat owners rarely see coming: it taxes German assets regardless of where anyone lives. § 2 Abs. 1 Nr. 3 ErbStG creates what the law calls beschränkte Steuerpflicht, limited tax liability. It applies when neither the deceased nor the heir was resident in Germany at the time of death, and it reaches every asset listed as Inlandsvermögen in § 121 BewG. Real estate in Germany is the first item on that list.

So an engineer who bought a flat in Munich, moved to Singapore, and dies there leaves a German tax case behind. Her children in Singapore owe German inheritance tax on the Munich flat. Not on her Singapore bank account, not on her index funds, not on a small shareholding in a German company: § 121 BewG does not list bank deposits, listed securities or holdings below 10 percent. It does list German land, German business assets with a permanent establishment, and loans secured on German real estate.

The other way round works the same. A German-resident parent who leaves a flat in Berlin to a child in Canada triggers full, unlimited liability because the deceased lived here (§ 2 Abs. 1 Nr. 1 ErbStG), and Germany also keeps that unlimited liability for five years after a German citizen leaves the country. The limited-liability case on this page is the one where everyone has already been abroad for a while. That is the situation most LDP clients will eventually be in.

The rule is symmetrical and it is not a loophole: Germany is the situs state and every treaty Germany has signed leaves the situs state its right to tax real estate. What changes with residence is not whether the property is taxed, but how large the allowance is and whether anything abroad is counted alongside it.

Classes, rates and allowances: the numbers that apply to everyone

German inheritance tax is progressive and depends on the relationship between the deceased and the heir, not on the asset. § 15 ErbStG sorts heirs into three classes. Class I is the spouse or registered partner, children and stepchildren, grandchildren, and parents when they inherit on death. Class II is siblings, nieces and nephews, parents-in-law, children-in-law, divorced spouses, and parents when they receive a lifetime gift. Class III is everyone else, which includes an unmarried partner of thirty years.

Personal allowances (§ 16 Abs. 1 ErbStG) and tax rates (§ 19 Abs. 1 ErbStG), unchanged since 2009
Heir	Class	Allowance	Rate on the taxable amount
Spouse or registered partner	I	€500,000	7% up to €75,000; 11% to €300,000; 15% to €600,000; 19% to €6 million; 23%, 27%, 30% above
Child, stepchild; grandchild whose parent has died	I	€400,000	same scale as the spouse
Grandchild	I	€200,000	same scale
Parents and grandparents on death; great-grandchildren	I	€100,000	same scale
Siblings, nieces, nephews, in-laws, divorced spouse	II	€20,000	15% up to €75,000; 20%; 25%; 30%; 35%; 40%; 43% above €26 million
Unmarried partner, friends, anyone else	III	€20,000	30% up to €6 million; 50% above

Two mechanics matter for planning. First, the allowance renews every ten years, and § 14 ErbStG adds up every gift from the same person within a ten-year window before the allowance is applied. Second, the rate applies to the whole taxable amount, not in slices, softened only by a hardship formula in § 19 Abs. 3 ErbStG at the bracket edges. A child inheriting €700,000 of taxable value pays 19 percent on all of it, not 7 percent on the first €75,000.

Those figures are the same for a resident and a non-resident heir. What differs is the next section.

The allowance is cut pro rata, and that is where non-resident families lose most

Until 2017 a non-resident heir got a flat €2,000 allowance and could opt into the full one. The European Court of Justice struck that down as discriminatory (Hünnebeck, C-479/14), and the German answer since then is § 16 Abs. 2 ErbStG. The full class allowance applies in principle, but it is reduced by the share of the acquisition that Germany is not taxing. The reduction counts everything the heir receives from the same person at the same time and within the previous ten years, wherever it is located.

In practice: the allowance available against the German flat equals the class allowance multiplied by the German-taxable share of the total estate. A large foreign estate therefore shrinks the allowance that is left for the German property, even though Germany taxes none of the foreign estate. Here is what that does to a typical LDP client case.

Worked example: one child inherits a let flat in Munich and a portfolio abroad from a parent who lived abroad
Step	Amount	Rule
Market value of the let Munich flat	€600,000	valued under §§ 176 to 198 BewG
Assessed at 90% because it is let for residential use	€540,000	§ 13d ErbStG
Foreign assets received at the same time (not German-taxable)	€1,460,000	outside § 121 BewG
Total acquisition for the pro-rata calculation	€2,000,000	§ 16 Abs. 2 ErbStG
Allowance left for the German flat: €400,000 x 540 / 2,000	€108,000	§ 16 Abs. 2 ErbStG
Taxable amount	€432,000	§ 10 ErbStG
Tax at the class I rate for €300,001 to €600,000	15% = €64,800	§ 19 Abs. 1 ErbStG
For comparison: same flat, full €400,000 allowance, no foreign estate	€140,000 taxable at 11% = €15,400	unlimited liability case

The same flat costs the same child four times as much tax because the parent held a large portfolio outside Germany. Nothing about the flat changed. That is the mechanism that owners abroad most often have not been told about, and it is the reason the planning steps at the end of this page are worth reading before, not after, an estate is opened.

A second consequence follows from the ten-year window: a lifetime gift of the flat to a child abroad is also a limited-liability case, with the same pro-rata cut, so gifting does not escape the rule. It can, however, split the value across two allowances if the two transfers are more than ten years apart.

What reduces the taxable value of the property

Let residential property is assessed at 90 percent (§ 13d ErbStG). The 10 percent discount applies to property in Germany and the EU, and to third-country property only where that country exchanges tax information to the OECD standard. A flat that is let on the day of death qualifies; a flat that stands empty does not.
Debts secured on the flat are deductible, in proportion. Under limited liability only debts that are economically connected to the German asset count (§ 10 Abs. 6 S. 2 ErbStG), and where the asset enjoys the 90 percent rule, the connected debt is deductible only at the same 90 percent (§ 10 Abs. 6 S. 5 ErbStG). A €200,000 mortgage on the flat in the example reduces the taxable value by €180,000, which at 15 percent is €27,000 less tax. Paying a German mortgage down early has a tax cost at death that most owners never price in.
The family home exemption rarely helps a non-resident heir. § 13 Abs. 1 Nr. 4b and 4c ErbStG exempts a home the deceased lived in until death if the surviving spouse or a child moves in without delay and stays for ten years, capped at 200 square metres of living space for children. An heir who lives abroad and keeps living abroad cannot meet the occupation condition.
The tax value can be challenged with an appraisal. Since the valuation reform that took effect on 1 January 2023, the statutory methods in §§ 176 to 198 BewG use parameters aligned with the ImmoWertV 2021 and produce values close to market, sometimes above it for older buildings. § 198 BewG lets the heir prove a lower value with a qualified appraisal or with an actual sale within one year of the date of death.
Funeral and estate administration costs are deductible only where they relate to the German asset, so the standard lump sum is not simply available in a limited-liability case; the actual costs of the German probate steps below are.

Foreign inheritance tax on the same flat is not credited

This is the part that turns a German tax into a double tax. § 21 ErbStG, the foreign tax credit, applies by its wording only in den Fällen des § 2 Abs. 1 Nr. 1, that is, to heirs with unlimited German liability. A non-resident heir taxed on the Munich flat by Germany and taxed again on the same flat by her own country gets no German credit. Whether the other country credits the German tax depends entirely on that country's rules.

Treaties change this in only a few places. Germany has separate inheritance tax treaties with Denmark, France, Switzerland and the United States, a treaty with Greece that covers only movable estate, and a comprehensive 1992 treaty with Sweden. Every one of them leaves real estate to the state where it lies, so the German tax on the flat stays; what the treaty does is oblige the residence state to credit it or exempt it. The Swedish treaty has a twist worth knowing: Sweden abolished its inheritance and gift tax in 2005, and the Bundesfinanzhof held on 24 May 2023 (II R 27/20, II R 28/20, II R 29/20) that a person is not treaty-resident for gift tax purposes in a state that levies no such tax, so the treaty no longer shields a transfer from Germany.

Heirs resident in the United Kingdom, India, the UAE, Singapore, Australia, Canada or anywhere else without a German inheritance tax treaty are in the no-treaty case. The UK, for example, taxes a UK-domiciled person on worldwide assets and grants unilateral credit for foreign tax on the same asset; the UAE and Singapore levy no inheritance tax at all, so there is nothing to credit and the German tax is simply the tax. Knowing which of these three situations applies is the first thing to establish, and it depends on the heir's residence, not the owner's.

What happens after the death, step by step

Within three months of learning of the inheritance, each heir must notify the tax office (§ 30 Abs. 1 ErbStG). For a limited-liability case the competent office is the one for the district where the property lies (§ 35 Abs. 4 ErbStG with § 19 Abs. 2 AO). The office then decides whether to request a return (§ 31 ErbStG); it usually does when real estate is involved.
The land register is not corrected automatically. To be entered as owner the heir must prove succession to the Grundbuchamt, by a German certificate of inheritance (Erbschein, § 2353 BGB), by a notarial will with the court's opening record, or by a European Certificate of Succession (§ 35 GBO). The correction is free of court fees if it is applied for within two years of the death (GNotKG, Kostenverzeichnis Nr. 14110, note 1); after that the normal fee on the property value applies.
Which law governs who inherits is a separate question from which state taxes. For deaths since August 2015 the EU Succession Regulation 650/2012 applies the law of the deceased's last habitual residence to the whole estate, including a German flat, unless the deceased chose the law of their nationality in a will (Art. 21 and 22). German courts apply the Regulation even where that residence was outside the EU (Art. 20). The United Kingdom, Ireland and Denmark do not take part, so a UK-resident owner's estate can be split between English law for movables and German law for the flat.
A sale to pay the tax is possible but not free. The tax is due on the date set in the assessment, usually one month after it. If the heirs sell the flat to fund it, the sale itself is an income tax event unless the deceased's holding period was already over ten years, see the next section.

Income tax follows the property into the next generation

Germany has no step-up in basis on death. The heir takes over the deceased's depreciation position: § 11d EStDV makes the heir continue the same AfA on the same original cost, so a flat bought in 2010 for €300,000 and inherited in 2030 at a value of €600,000 keeps being depreciated on €300,000 less land. On the other hand the heir also inherits the clock: under § 23 Abs. 1 S. 3 EStG an inheritance is not an acquisition, so the ten-year speculation period runs from the deceased's purchase date. A flat the parent bought twelve years ago can be sold by the child the day after the funeral without German capital gains tax; a flat bought four years ago cannot.

Rental income keeps being German-taxable for a non-resident heir under § 49 Abs. 1 Nr. 6 EStG, with the same non-resident return the owner filed. None of this is new to an LDP client, but the timing question it raises is: whether it is better for the family that the flat is sold by the parent, gifted, or inherited depends on where the ten-year clock stands at each of those moments.

What an owner abroad can do now: five decisions

Find out which of the three cases the family is in. Treaty country, unilateral credit country, or no-tax country for the heirs. It decides whether the German tax is a cost on top or the only tax, and it depends on where the children live, which changes.
Run the pro-rata calculation on the real numbers. The allowance for the German flat depends on the size of everything else the same heir will receive. An owner with a large estate abroad and one German flat should expect the allowance for that flat to be a fraction of €400,000, and can plan gifts in ten-year tranches to reset it.
Keep the mortgage, or at least do not rush to clear it. A loan secured on the flat is deductible at 90 percent under limited liability. Early repayment converts a deductible debt into a taxable equity.
Write a notarial will in German with a choice of law, and say where the original is. A German notarial will replaces the Erbschein for the land register, saves months and the court fee on the estate value, and a choice of the law of nationality under Art. 22 of the Regulation removes the risk that a move abroad silently changes who inherits the flat.
Book a valuation reflex. Note now which comparable sales exist for the building, because § 198 BewG lets the heirs prove a lower value with an appraisal or a sale within a year, and the statutory value since 2023 is often at or above market for older stock.

If the flat is let, keep it let: the 10 percent reduction under § 13d ErbStG depends on the facts on the day of death, and an empty flat between tenants loses it.

Limitations and what we do not know

We are a property investment firm, not a tax adviser or a law firm. The paragraphs above are checked against the statutes as of September 2026; the application to a specific family, especially the interaction with the heir's own country, needs a cross-border adviser. We can name English-speaking ones.
The worked example uses the class I rate scale without the hardship adjustment of § 19 Abs. 3 ErbStG and ignores the funeral and administration cost deductions; both would change the result by a few thousand euros, not its order of magnitude.
We have not verified the current scope of the Greek treaty beyond the standard description that it covers movable estate only, nor whether the Danish and Swiss treaties extend to gifts. Anyone in those four treaty situations should read the treaty text, not this page.
The valuation reform of 2023 raised statutory values unevenly by city and building age; how far above market a given Munich or Berlin flat is valued is not something we can state in general.
Whether the € 15,000 lump sum for estate costs applies in a limited-liability case is disputed in the literature; we have left it out rather than count it.

What would change this answer

A change to § 16 ErbStG allowances or to the pro-rata rule in Abs. 2; the allowances have been fixed since 2009 and a reform is discussed in every legislative period.
A new inheritance tax treaty, or the termination of one; the list has been stable for decades but the Swedish case shows a treaty can stop working without being terminated.
A change to the valuation rules in §§ 176 to 198 BewG, which last moved on 1 January 2023 and drove statutory values up.
A court decision on § 21 ErbStG extending the foreign tax credit to limited-liability heirs; the discrimination argument that removed the €2,000 allowance in 2017 has not yet been run against the credit rule.

Last reviewed September 10, 2026. Reviewed by Nicholas Runtic and Abdelrahman Maged, co-founders of LDP Group, before publication and at every review date. We review this page every quarter and whenever the ErbStG, the BewG or the treaty list changes. If you are reading it more than three months after the date above, check § 16 Abs. 2 ErbStG and the BMF treaty list before relying on a figure.

Frequently asked questions

Do foreigners pay German inheritance tax on German property?

Yes. German real estate is always taxable in Germany, even where the deceased and every heir lived abroad. Under § 2 Abs. 1 Nr. 3 ErbStG only German-situs assets are taxed in that case, and property is explicitly one of them under § 121 BewG. Bank accounts, listed securities and shareholdings below 10 percent are not on that list.

Is the allowance reduced for heirs living outside Germany?

Yes. Under § 16 Abs. 2 ErbStG the class allowance is cut in proportion to the part of the total acquisition that Germany does not tax, counting everything received from the same person at the same time and within the previous ten years. A child inheriting a €540,000 German flat inside a €2 million estate keeps €108,000 of the €400,000 allowance.

Can German inheritance tax on a flat be credited against tax in my own country?

Not by Germany. § 21 ErbStG credits foreign tax only for heirs with unlimited German liability. Whether your country credits the German tax depends on its own rules or on a treaty; Germany has inheritance tax treaties only with Denmark, France, Greece, Sweden, Switzerland and the United States, and all of them leave real estate to Germany.

Is a rented apartment taxed on its full value?

No. Residential property that is let on the day of death is assessed at 90 percent of its value under § 13d ErbStG, a flat 10 percent discount. A mortgage secured on that flat is deductible at the same 90 percent under § 10 Abs. 6 S. 5 ErbStG. An empty flat gets neither the discount nor the full debt deduction.

Does the heir get a new tax basis for the flat?

No. Germany has no step-up on death. The heir continues the deceased's depreciation under § 11d EStDV and also inherits the ten-year speculation clock under § 23 Abs. 1 S. 3 EStG, so a flat held by the parent for more than ten years can be sold by the heir free of German capital gains tax immediately.

What must a non-resident heir do first?

Notify the tax office for the district where the property lies within three months of learning of the inheritance (§ 30 ErbStG), then arrange proof of succession for the land register: a German certificate of inheritance, a notarial will with the opening record, or a European Certificate of Succession. The land register correction is free of court fees if applied for within two years of the death.

Who pays German inheritance tax on a property when the heirs live abroad?